Russia sees decline in smokers

Experts believe, the numbers of smokers in Russia should be reduced by 5 percent every year. Source: ITAR-TASS

Higher taxes on tobacco products has forced more Russians to quit smoking.

Tobacco users in Russia decreased by more than 5
percent in 2013, and experts expect a new higher excise taxes to reduce further
the sale of cigarettes.

Every
Russian smoker knows the cost of his or her favorite brand of cigarettes, so
when the price changes even slightly, its affect is felt. This was actually
what the regulatory authorities were betting on when they increased the excise tax
rate. By their calculations, the average person’s desire to save money would
outweigh the craving for smoking.

Russia ranks fourth in world
rankings for the biggest number of smokers with 2,786 smoked cigarettes per
adult citizen, according to the World Health Organization. However, thanks to
current governmental measures, including an increase in excise taxes, the
number of smokers should be reduced by 5 percent every year, experts predict.

Excise rates in Russia are
growing annually, and by 2015, this “sin tax” will double once more. The tax
rate is calculated by a complex formula – in 2015, it will look like this –
$28.6 per 1,000 items plus 9 percent of the price.

Another effective measure for
decreasing Russian smokers is the law banning smoking in public places. It has
been in force only since June 2013, yet has already affected the producers.
During the first nine months of 2013, cigarette production declined by 5.4
percent, compared to the same period of the previous year. Experts predict that
the tobacco market will continue to decline in 2014, by 9 percent to 11
percent.

“Additional charges have always
helped in combatting smoking and excessive drinking. After all, cigarettes and
alcohol are not a necessity of life, and unlike food, a person can go without
them,” said Esben Tranholm Nielsen, a business consultant for the Ministry of Agriculture
and Food of Denmark.

Only schools, hospitals and
government offices are subject to the smoking ban law. For cafes and
restaurants, it will enter into force only in 2014. However, many catering
establishments have already started to follow this law.

Alexey Savin, the manager of
public relations for “Darling, I’ll Call You Back...” bars network, claims that
restaurateurs sometimes take antismoking measures themselves, and much more
efficient ones than those the state takes when it comes to prohibiting smoking
in their establishments.

“Often, this is done especially
for the guests, because the smell of tobacco blocks people’s taste buds,” he
said.

Public health organizations are
also optimistic for now.

“Increasing the price of tobacco
by 10 percent led to the fact that in Eastern Europe, the demand for it has
fallen from 3 to 13 percent. For 11.5 percent of new smokers, the cost became a
decisive argument against this bad habit,” said Renat Layshev, the president of
the Russian Children: Educated and Healthy, nonprofit organization.

According Layshev, even if the
reduction is small at first, over time, these measures have their effect. “When
combating smoking only began in Brazil, through new laws, they also achieved
little. Only 2 percent of the smokers gave up tobacco. Today this is already 8
percent.”

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However, tobacco companies tend
to evaluate this data in a different way. Anatoly Vereshchagin, the communications
director of Japan Tobacco International in Russia, said the law has been
implemented only recently, so it cannot have had such an effect.

As for the
influence of excise taxes, customers, according to him, do not always quit
smoking, and often they just turn to counterfeits or the smuggled cigarettes
market. He claims that this is the reason that the share of smuggled goods in
the Russian market has grown three-fold – up to 6 percent in the last year.

Alexander Lyutiy, the corporate affairs
director for British-American Tobacco Russia, agreed, adding that rising of
prices, according to the observations of BAT, does not significantly affect the
number of smokers, but it makes them think about a cheaper alternative.

This
leads to the appearance of underground productions flowing into Russia. So, even
though statistics show a decrease in demand, in fact, according to Lyutiy,
their number probably does not vary greatly – some of the smokers may have just
switched to illegal products.

“The main reason for a reduction
in consumption of legal products is, in our opinion, the rise in prices,”
Lyutiy said. “In the last seven years, this tax has increased six-fold. If in
2006, the average cost of a packet of cigarettes was 16 rubles ($0.5), now it
is 43 rubles ($1.3). In 2014 it will increase to 52 rubles ($1.6), and this is
only due to rising excise taxes.”

According to the calculations of
his company, because of that, this year the legal market volume, in physical
terms, will, according to preliminary estimates, be about 7 percent to 8
percent lower than in the previous year.